Headed by CEO Larry Fink, BlackRock and other investment firms have increasingly used their client’s shares as clout to pressure companies into following ESG standards, short for “environmental, social and governance” policies. It has questioned investments in sectors such as fossil fuels, a divestiture that many experts say not only benefits the climate but also is a smart investment strategy.
But nationwide, many GOP state treasurers and attorneys general have organized themselves to rebuff such ESG policies. Florida’s Patronis, a Republican, is the latest.
“If Larry, or his friends on Wall Street, want to change the world — run for office. Start a non-profit. Donate to the causes you care about,” Patronis said in a statement, citing Fink’s comments about using shareholder stakes to influence corporate behavior. “Using our cash, however, to fund BlackRock’s social-engineering project isn’t something Florida ever signed up for.”
Patronis also sits on the $217.5 billion Florida State Board of Administration along with Florida Gov. Ron DeSantis (R) and Attorney General Ashley Moody (R), but for now there was no change in policy at the giant pension fund. He said at the state treasury BlackRock had managed $1.4 billion of long-duration funds and $600 million devoted to short-term cash activities.
The move against BlackRock follows efforts in states such as Missouri, Louisiana and Texas to derail ESG corporate standards and cudgel Democrats over their use.
At an Aug. 23 meeting of the Florida Cabinet, trustees unanimously adopted a resolution restricting the use of ESG factors in making investment decisions in the Florida Retirement System Defined Benefit Plan.
The new Republican-led U.S. House is planning to call executives from major financial institutions to appear at what promise to be contentious oversight committee hearings.
The politicization of the issue frustrates many fund managers, because climate change has been shown to expose companies to various risks, ranging from direct effects of extreme weather to market fluctuations. Investors themselves are also making demands.
“Most investors are saying that, in addition to getting financial returns, they want their money used in ways they’re not embarrassed by,” said Joshua Gotbaum, an investment banker who has served in five administrations from both parties, including a stint as head of the Pension Benefit Guaranty Corp.
“Unfortunately, part of what’s going on is that politicians who don’t want to admit that there’s climate change would like to say that taking environmental and social factors into account is somehow inappropriate,” he added.
The ouster of BlackRock will have little immediate impact; the firm worldwide was managing nearly $8 trillion at the end of September.
BlackRock’s director of corporate communications, Christopher Van Es, said the asset management firm acted “with the sole goal of driving returns for our clients.” He cited the “strong returns BlackRock has delivered to Florida taxpayers over the past five years.”
“We are disturbed by the emerging trend of political initiatives like this that sacrifice access to high-quality investments and thereby jeopardize returns, which will ultimately hurt Florida’s citizens,” Van Es said.
He also said that long-term investment flows into BlackRock had reached $84 billion in the third quarter of this year and $275 billion over the last 12 months.
Other major asset managers include Vanguard and State Street.